Mortgage stress a reality even for high-income families

"It's an absolute fallacy that mortgage stress wouldn't be impactful in high-income households," expert says

Mortgage stress a reality even for high-income families

New data from housing data firm PropTrack reveals that hundreds of thousands of Australians who may face tax increases under the Albanese government's income tax plan are also struggling to own a house without experiencing financial stress.

The analysis shows that in major cities like Sydney, Melbourne, and Canberra, households must have high after-tax incomes to comfortably service a mortgage on a median-priced property, according to a report by The Australian.

In Sydney, families need to have a minimum after-tax income of $200,000 to afford a median property worth $1.025 million without falling into mortgage stress. In Melbourne and Canberra, households must have a take-home pay of around $150,000 to manage a mortgage on properties with average prices exceeding $760,000.

Families in all capital cities except Darwin need six-digit after-tax incomes to avoid home loan stress, The Australian reported.

“It’s an absolute fallacy that mortgage stress wouldn’t be impactful in high-income households,” CoreLogic research director Tim Lawless (pictured above left) told the publication. “Most households will be feeling the cost of mortgage pressures quite significantly given how much interest rates have risen and the level of household debt we have in Australia, which is mostly dominated by housing debt.”

Impact of tax changes and housing affordability

Higher-income households were initially set to benefit from stage three income tax cuts, with the potential for around $9,000 per year returned to their pockets However, the Albanese government is considering changes to the policy, particularly for those earning more than $150,000, due to the global economic situation.

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PropTrack's executive director of research, Cameron Kusher (pictured above right), explains that the conservative figures regarding income requirements reflect the ever-increasing housing costs, which necessitate higher incomes to afford loan repayments.

“The cost of housing in our major capital cities is so high, it does make it very tough for anyone, but particularly people earning less than, say, $150,000 a year to enter into the housing market without some sort of assistance,” Kusher told The Australian.

While tax relief may provide some relief for households, Lawless said that a fall in interest rates would likely offer more substantial help to stressed families. PropTrack's housing outlook suggests a potential increase in property prices nationally over 2024, but the surprise tax change has not been factored into these projections and may lead to softer-than-expected conditions.

On the rental side, families need to earn at least $100,000 in more than half of Australia's capitals, including Sydney, Brisbane, Perth, Canberra, and Darwin, to live comfortably, The Australian reported.

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